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| Economy |
| Payouts to Bankrupt A123 Systems Likely to Continue |
| 2012-11-20 |
| A reply by stimulus recipient ($115 million of a $249 million grant paid out) A123 Systems to an inquiry by Republican Sens. Charles Grassley (Iowa) and John Thune (S.D.) showed the electric vehicle battery manufacturer received nearly $1 million in Recovery Act funds on the day it declared bankruptcy. The money flow is not likely to stop. A123 as a whole, or in pieces, is going to be sold to the court-approved buyer(s). That is likely to be either Johnson Controls, which is the lead bidder for the company’s automotive business, or Wanxiang Group, which wants to buy the whole company. A123 had an agreement to transfer up to 80 percent of the company’s ownership to the China-based automotive parts manufacturer over the summer, but its bankruptcy filing on Oct. 16 – with Johnson Controls as the new automotive assets purchaser – nullified its agreement with Wanxiang. But before that, one of the conditions of the Chinese deal was that all of A123’s government grants and tax credits remain intact after transfer of ownership. Presumably that part of the equation makes the company – otherwise a total failure – an attractive acquisition. In his letter to Sens. Grassley and Thune, A123 General Counsel Eric Pyenson acknowledged as much in response to the senators’ question about whether A123 still “needed” taxpayer funding with the pending influx of millions of dollars from Wanxiang (before the bankruptcy filing). Pyenson told the senators that A123’s grant was not awarded based upon the company’s financial needs, but instead to stimulate job creation in the alternative energy sector. “If A123 (or a potential successor-in-interest to the Grant) needs to expand and/or update its current U.S. manufacturing capacity beyond current capacity,” Pyenson wrote, “then it is possible that it may desire to take advantage of some or all of the remaining Grant funds to do so.” In other words, A123’s grant is transferable to whoever purchases its assets regardless of nationality, financial condition, or public perception – at least in the view of its top lawyer. Not only that, but the purchaser will have until the end of 2014 to spend down the grant, after the Department of Energy agreed to extend its terms by two years. A123 was originally required to use the money (and thus “stimulate” the alternative energy economy) by the end of this year. This grace was extended at about the same time DOE cut off the $529 million stimulus loan of A123’s top customer, Fisker Automotive, allegedly due to its inability to meet certain milestones, which at a minimum illustrates DOE’s inconsistency in grant management policies. |
| Posted by:Au Auric |